While some other banks have been rewarding their shareholders over the past 12 months, HSBC Holdings (LSE: HSBA) (NYSE: HSBC.US) shares have been in a bit of a rut — they’re now down around 12% since this time a year ago, to 646p, while the FTSE 100 has returned 7%.
Chinese threat
The reason is largely the bank’s exposure to China — about a third of HSBC’s profit in 2012 came from Hong Kong, with about 75% overall from the Asia Pacific region. And if China’s booming credit and rising property markets should crash, well, HSBC could be in for some pain.
But none of that will affect results for the year ended December 2013, which should be with us on Monday 24 February.
In fact, there’s a pretty nice rise in earnings per share (EPS) of 27% currently forecast, to 56p, and that is currently expected to herald three years of rising EPS after a few erratic years — but at least they were years in which HSBC avoided the worst of the woes affecting Western-oriented banks.
Steady dividends
The annual dividend is expected remain flat at around 31p per share, with rises penciled in for the following two years — though obviously, this year and next are very uncertain right now. But even with a flat dividend, that would yield 4.8% with the share price having dropped since a year ago. And if forecasts are to be believed, the yield could rise to 6% by 2015.
HSBC pays its dividends quarterly, and we’ve had three payments so far this year totaling 18.9p, with payments over the nine months up around 10% in dollar terms on the same period in 2012. By policy, the first three are equal (in this case 10 cents each), with a variable final dividend.
HSBC did say at Q3 time that it supports a “progressive dividend”, so we’re likely to see an overall rise in cents, but exchange rates should keep it about flat in pennies.
Worth buying?
With the shares having fallen, are they cheap now?
Analysts are expecting a P/E based on 2013 results of around 11.5, which is below average — and on the face of it, pretty cheap for a share yielding 4.8% and rising. And the ratio would drop as low as 9.4 by 2015 based on two-year-out forecasts. That assumes no tough landing for China, though, and that would be a tough call to make.
But if the Chinese do manage to contain their overheating in a less inept way than so many countries closer to home, we could be looking at a good-priced investment. After all, the long-term future for the still-developing markets of China and the rest of Asia is undoubtedly rosy — and HSBC has a big finger in that pie.